Copyright Lobbyists And The $1 Trillion Fallacy

from the even-if-we-take-the-bogus-stats-at-face-value dept

Well, here we go again. Earlier this week, the IIPA (a sort of uber copyright maximalist lobbying group, made up of other copyright maximalist lobbying groups, including the MPAA, RIAA, BSA, AAP, NMPA, ESA and IFTA) released a new report on the economic impact of "the Copyright Industries." This report comes out every few years, written by the copyright maximalists' favorite economist, Stephen Siwek, who is well known for both these reports and another set of reports in which he tries to calculate "losses" due to infringement using the most ridiculous and misleading methodology imaginable. This report is slightly different. There's not much in the way of direct methodology: he's basically lumping together a bunch of industries as "core copyright" industries, and presenting some stats around them. There are also the "partial copyright" industries, which are kind of laughable, since it includes things like "furniture."

The report is incredibly misleading (and is being used in a misleading way), but we'll get to that. Instead, let's start out by taking the report at face value, and assuming that it is accurate. The claim that the backers of the report (including NBCUniversal, which funded it) are latching onto is the big round number: the claim that:

for the first time,
the contribution of the core copyright indus-
tries of the U.S. economy surpassed one trillion
dollars in 2012

One Trillion! Big number. So big that the IIPA was even able to get the head of the Copyright Office, Maria Pallante, to highlight it in her presentation that coincided with the launch of the report. She apparently put that number on a single powerpoint slide and asked people to remember that number.

As we'll describe, that number doesn't actually say what Pallante and others are pretending it says, but even if it did... doesn't it suggest that the industries are doing fine? Even as infringement has continued to be a major issue, and there are new ways to share content around the globe, the data in the report suggests that the "core copyright industries" have continued to grow and thrive at a very consistent pace -- completely contrasting the supposed doom and gloom these same folks tell us about how piracy is supposedly killing these industries.

Instead, the report shows a steady increase in revenue within these industries, a steady increase in employment and a steady increase in the salaries of those employed in those industries -- in which they make more than people in many other industries. Basically, every chart in the report suggests that the "core copyright industries" are thriving, especially compared to the wider economy. Take, for example, the compensation chart:

And yet, during those same years, we were being told, repeatedly, that those industries were dying, that jobs were going away and that we needed much stricter new copyright laws. This chart seems to debunk all of that.

But... of course, that's not how the IIPA and its supporters are spinning this report. Instead, they're using it to argue that "the core copyright industries" are "so important" to the US economy that they need to new laws and protection:

"This study represents a milestone," said Steven J. Metalitz, counsel to the IIPA. "In order to preserve and enhance jobs, exports and economic contributions, it is critical that we have strong legal protections for U.S. creativity and innovation in the U.S. and abroad."

[....] "This report makes it crystal clear that workers in the creative industries make a huge contribution to America's economy," said Matt Loeb, international president of the International Alliance of Theatrical Stage Employees, which represents crew members on movies and TV shows. "It also underscores the urgent need to do more to build, strengthen and protect employment in this dynamic part of our nation's economy."

But... neither of those claims follows from the numbers presented. If these people knew anything about basic economics, they'd know that protectionism doesn't help grow markets -- it constrains them. The way you "strengthen" employment in these markets is by allowing competition and innovation to flow, which is the exact opposite of the legal regime they're pushing for. Of course, everyone knows what this is really about. The report is supplied by a few legacy players in this space, the ones threatened by innovation and upstarts. It's being pushed by the gatekeepers who don't want to compete. They don't want there to be more competition and innovation, because that tends to allow artists and creators to go direct -- and not to have to rely on gatekeepers, who take an 85% cut of all revenue.

Even worse, the report is incredibly misleading -- in effect allowing Siwek, the IIPA, Maria Pallante and other copyright maximalists to blatantly use the success of others who did not rely at all on copyright to support their notions that we need more copyright. That's because of a basic fact that is totally ignored in the report: just because you produce "copyright" covered content, it does not mean that you needed copyright to do so, or that you require copyright laws to do so. Instead, the report and its supporters are falsely claiming that every bit of revenue from the "core copyright industries" is because of strict copyright law. That's provably false. Hell, technically, the revenue that this very site that you're reading now produces is almost certainly included in that "$1 trillion." We're very much a part of the "core copyright industries." And yet we don't rely on copyright. At all. In fact, we dedicate all of our content to the public domain.

And it goes beyond that. A significant portion of the revenue they're discussing actually comes from computer software:

But that's an industry where there's tremendous support for changing copyright laws so that there's less protection and more sharing. The growth of the open source movement, and the fact that it powers so much of what we do today, is hardly an argument for stricter protectionism and ratcheting up copyright laws. But, by lumping them all in as "core copyright industries" and then pretending that means you need strict copyright laws to create that content, Siwek, his funders and their friends get to actually use the innovations and business models that show why stricter copyright may be a bad idea... to argue for stricter copyright law.

It's not just blatantly dishonest, it's co-opting the economic activity that disproves their argument to pretend it supports their argument. That Maria Pallante would quote that number and support it suggests serious problems in how the Copyright Office views things today. This kind of report has no business being taken seriously, let alone being used in any policy arguments at all. But, if it is, at the very least, people should point out that, if taken at face value, it pretty clearly shows that the copyright maximalists have been flat out lying about their industries struggling, and how they need things like SOPA, TPP and other legal changes.

Re:

What I wonder is how much economic activity their would be if copyright was abolished. It is feasible, and looking at free and open-source software, quite likely that copyright is inhibiting economic activity in the creative industries.

The 800lb Zombie.

It's funny how the newer industry dwarfs the others. It does this despite having it's own problems with piracy. Despite the rampant copying, all manner of software development continues to thrive. Copy protection methods come and go and seem to be entirely irrelevant.

Some companies are better at getting people to pay them money but that's business.

According to the logic of the media moguls, the software industry should be dead by now but it's the 800lb gorilla in their "statistics".

Doctor: "I'm sorry, the cancer is growing. The only way to stop it now would be to surgically remove it."

Patient: "Okay. When can we schedule that procedure?"

Doctor: "Oh, we can't remove it. The cancer has successfully argued that its exponential growth is proof that its further growth should be protected. You're also being sued for violating its copyright on your DNA..."

Re: Re:

the people in the report only say what they do because they are a) trying to ensure they dont get sacked which leads to b) they are paid to say what they do.these and many others would be first to complain about the members of any other section of the workforce, and complain about any figures put out to justify laws that gave them guaranteed jobs for years ahead and salaries far in excess of what the job is worth and what others get, all of whom aid the economy!

Re:

When will people wake up and realize that all these reports that are being put out and all the lobbying over new copyright related laws are just an elaborate show? Nobody in the government actually cares about any of this. They (with maybe a couple exceptions) all support the copyright industry wholeheartedly. All this crap only exists to make it seem like they're not at the beck and call of the corporations, which of course they are. Just try and find a single politician who doesn't believe with every fiber of their being that copyright only exists to benefit the copyright holder. Go ahead, I dare you! Even the ones who may not support expansion of copyright still believe that it exists solely to protect the profits of copyright holders.

All the talk about "promoting progress" and "for a limited time" is nothing more than legacy language that nobody in power pays any attention to anymore. They'd happily remove it if they could do so without causing a stir.

In today's world, only corporations matter and everyone else only exists to make those corporations richer.

Re:

Aww...isn't that cute! This AC is still stuck on the copyright infringement = physical theft fallacy. Don't worry, someday soon, you'll grow up and learn things, like important distinctions between laws.

Re:

And in related news: Walmart reports record profits despite losses to shoplifting. Shoplifters everywhere call for the repeal of petty theft laws.

I don't recall Walmart running to Congress and international forums screaming about how they're all going to die if we don't ratchet up theft laws, do you?

In fact, Wal-mart has an official policy in place not to even bother stopping most shoplifters, recognizing that it's just a cost of business, and they can focus on other things more important to their business.

Aww...isn't that cute! This AC is still stuck on the copyright infringement = physical theft fallacy. Don't worry, someday soon, you'll grow up and learn things, like important distinctions between laws.

Re: Re:

I don't recall Walmart running to Congress and international forums screaming about how they're all going to die if we don't ratchet up theft laws, do you?

Probably because shoplifting laws are state or local. Derp.

In fact, Wal-mart has an official policy in place not to even bother stopping most shoplifters, recognizing that it's just a cost of business, and they can focus on other things more important to their business.

Really? Got a link? The guy I saw a week ago face down in the parking lot in cuffs probably believed the same thing. It didn't work out so well for him. Maybe you could have some of the people you employ test this policy at their local Walmart as part of a Techdirt study.

The entertainment companies only total something like 8% at best of the GNP. They found out just how big they were when they went for the first time around for DMCA and all the other groups of industry found out how it was going to effect them. It wasn't very long after those industries started quitely lobbying congress that the first DMCA proposal was out in the cold.

I know that government is cheating on inflation numbers just like it is cheating on the unemployment numbers but face it, it isn't all that bad yet that 1 trillion dollars looks realistic. Not only did they have to lump in industries that don't really depend much on copyright but how many times did they count them? This was a problem in the past studies that some companies had the same revenue counted over and over again.

The whole thing stinks of propaganda slanted towards justifying corruption that is rampant and ongoing today.

Re: Re: Re:

Here's another interesting tidbit. More dollars lost to employee theft than customers shoplifting:

The national study, based on information obtained from 106 retail chains that responded to a questionnaire, said employees were responsible for 43 percent of the stores’ unexplained losses, versus 36 percent for shoplifting. Source

• Expenditures for research and development (R&D) and for entertainment, literary, and artistic originals provide long-lasting service to the businesses, nonprofit institutions, and government agencies that use them.

• These expenditures have many characteristics of other fixed assets—ownership rights can be established and they are long-lasting and used repeatedly in production processes.

• As part of its 14th comprehensive revision of the national income and product accounts that will be released beginning on July 31, BEA will record expenditures for R&D and for entertainment, literary, and artistic originals as fixed investment. These expenditures will be grouped with expenditures for software into a new investment category “intellectual property products.”

Why is BEA making this change?

• Currently R&D and entertainment, literary, and artistic originals are recorded as intermediate inputs used up during the production of other goods and services. As a result, the contribution of these important innovative activities to economic growth and productivity is difficult to measure.

• By recognizing R&D and entertainment, literary, and artistic originals as investment, the contribution of these components to growth can be measured. In addition, BEA’s statistics will be more consistent with international guidelines and comparable with those in other countries.

• BEA already recognizes capital investment in other intangible assets such as software and mineral exploration. Information from the National Science Foundation on R&D spending and information on movie, TV, literary, and music production and sales allowed BEA to develop estimates of investment and consumption of fixed capital (CFC)—a measure of depreciation—for these important intangible assets.

How will this change affect BEA’s accounts?

• The dollar level of GDP will increase to reflect recognition of spending on R&D and on entertainment, literary, and artistic originals by businesses and nonprofit institutions serving households. Federal and state and local government consumption expenditures and gross investment—which is also included in GDP—will increase by the amount of CFC on the newly recognized R&D investment. Spending on R&D will be reclassified from consumption expenditures to investment within the sector.

• The dollar level of private and government CFC will increase to reflect the depreciation of the newly recognized assets in the capital stock.

• Measures of corporate profits and proprietors’ income will reflect the net effect of removing these expenditures from operating expenses and adding the depreciation of these assets to operating expenses.

Re: Re: Re:

Probably because shoplifting laws are state or local. Derp.

Uh, you know what I meant. Or, if you didn't, you're more idiotic than previous statements have indicated. Point being: they don't go around screaming their heads off about how the company is dying because of this, and demanding any sort of legal change. In contrast, your industry does that all the fucking time.

And this study shows that it's for no good reason.

Really? Got a link? The guy I saw a week ago face down in the parking lot in cuffs probably believed the same thing. It didn't work out so well for him. Maybe you could have some of the people you employ test this policy at their local Walmart as part of a Techdirt study.

In 2006, Walmart changed its policy to not go after anyone caught shoplifting less than $25 worth of material. The official policy also says that they can only chase them for 10 feet ("about three long steps") before giving up the chase.

While they will go after repeat offenders and those stealing big items, they've basically said that the small time shoplifters (the majority of shoplifters) aren't worth pursuing. Nor are they running to change any laws about it or complaining about how they're losing all this money from them.

Re: Not proud of my union on this

I see that IATSE is a member organization of the Copyright Alliance, according to their website. You should make your IATSE brethren aware that aside from being rabid copyright maximalists and astroturf for MPAA and COMCAST, the CA is quite the den of anti-unionists; very apparent when you look at its parent organization, the Nickles Group LLC. It's my guess that these people probably love nothing better than destroying unions while at the same time making money for the MPAA and their other old-guard media and telecom clients. Probably provides them with some yuks at ALEC conventions.

Re:

Re:

The commission is bought by the copyright cartels and will never let this pass. A organization as monstrously corrupt as the EU will not let their many and varied paymasters suffer any reduced cash flow stemming from changes of laws.

Re: One trillion?

It adds up quickly if you, as they do, assume that every single industry relies and depends on copyright, at least to a degree. The fact that such an assumption is insane is apparently (intentionally) missed by them.

Re:

It's not that hard actually, just requires a massive self-centered and entitled way of looking at things.

To shareholders: 'We're making a killing in the market, with profits up across the board!'

To politicians: 'Though we made an okay amount this year, we would have made several times that much if there were even more laws protecting us and punishing competi- I mean those dirty pirates.'

If you keep in mind that you're dealing with a group with a massive sense of entitlement, such that they think that it's reasonable to expect every other industry to help them and bow to their demands, then it's not hard to see that to them it doesn't matter how much they made, since they always want, and feel entitled to, more.

Another interesting thing to point out is that after excluding the software industries, the numbers for the "legacy" publishing centric industries are flat overall. The movie business is seeing year over year increases, but recording and print businesses continue to fall into irrelevance. In the end, it's basically a wash.

Obviously, the real money is in software. The legacy publishers claim that their precious content is such a vital part of the "copyright industry", but it's the software guys--you know, the ones actually designing and building the systems and services that everyone uses--are the ones racking in the dough. Those software powered systems can deliver industry movies and albums just as well as indie bands and movies, or even cat videos. There is NO shortage of content. What really matters are the ones who deliver it.

Re:

Historically--whether it's faster ships, trains, airplanes, freeways or the internet--economic advancement has always been tied to advancements in distribution. You can write the greatest song or create the greatest invention of the decade, it's still means nothing to everyone else until you can distribute it.

Each further advancement has always, in part, displaced the previous modes of distribution--and the businesses dependent on them. Just like all of the others that have come before, the Internet is the fastest, most efficient method of communication and distribution to date. Not only does it fully displace distribution for works that can be digitally encoded, but its improvements in communication makes all other methods of distribution more efficient as well. And just as the other advancements in distribution had displaced the businesses that were unable, or just unwilling, to adapt to the changing market, the businesses that embrace digital globally-connected commerse will displace businesses that don't. It's totally inevitable.

And of course, what underlies it all is lots of fiber, silicon and software.

Re: Economic Activity

Basic economic theory suggests that monopolization and rent-seeking have a depressing effect on economic activity.

To be fair, though, it's not *quite* as clear-cut as that.

Copyright ownership and management overhead can be dismissed. All of that is a drag on economic activity - enforcement, legal, administration. Get rid of that and the economy benefits.

Where you have to go cautiously is with content creators. If we aren't going to protect their products, then we must be able to visualize a way for them to be rewarded for their effort.

Techdirt.com is an example of a content creator which does not rely on copyright and still is able to reward content creation. It does this by attracting advertising. There are other examples large and small, but there are also counterexamples where lack of copyright protection will impede content creation, such as books. If anyone can copy a book and sell it, sidestepping the investment cost of creating it, then authors won't have much incentive to write books.

Ideally, the law would be shaped entirely around the goal of incentivizing content creation. Where incentives are adequate without copyright, there is no compelling reason for the public to consent to monopolization. Long-duration copyrights, particularly copyrights which endure long after their content creators are deceased, have little to no incentivizing effect.

Patents are a whole different ball game, but as your comment dealt mainly with copyright, I'll stop here.

Re: Re: Re:

If I have the argument here straight, the industry is rolling in dough that seems to be increasing, so why all the fuss? Don't the number illustrate that piracy is not destroying the industry?

IOW, they are doing just great...so taking money off the top is just the price of doing business.

Is there any illegal act you would ever consider to be worthy of legal action (civil suit of criminal prosecution)? Repetitive comments here seem as if the answer is "No", which I find much too "Obama-esque" for my liking.